Inversion opposition "a lot of noise," Mylan CEO says

Even before the expected early 2015 close of Mylan Inc.’s controversial pending purchase of Abbott Laboratories’ generic European businesses, the Southpointe-based pharmaceuticals firm could execute another deal.

CEO Heather Bresch and CFO John Sheehan both hinted at another acquisition during Mylan’s (Nasdaq:MYL) investors call Thursday following release of disappointing second-quarter earnings and lowered earnings guidance for the rest of 2014.

“We absolutely are busy looking at strategic and financially accretive transactions,” Bresch said. “I’m not giving a time frame, We’re active and there’s nothing precluding us announcing a deal before the Abbott closing. But we don’t have a gun to our heads. There are a lot of opportunities. That’s what our interests are.”

Earlier Thursday, Mylan posted net income of $124.2 million, down from $177.7 million a year ago. Although revenue rose 8 percent to $1.84 billion, it too fell short of Wall Street’s estimates. Mylan adjusted its 2014 earnings guidance and now expects adjusted EPS to range between $3.25 to $3.45, down 15 cents on the high-end, and revenues to range between $7.8 billion to $8 billion, again curbing the top number slightly from $8.2 billion.

But the company’s estimates hinge on receiving regulatory approval on generic versions of Copaxone and Celebrex.

“There are no science issues, we don’t have any facility issues, it is absolutely administrative and timing on the FDA’s part,” Bresch said. “We believe we have a couple of approvals that are imminent, while much slower that we’d like. We think we’ll have a stream of approvals that will reflect what we’re telling you now.”

“Even without the launch of Copaxone, we would expect to be within our range for the year,” Sheehan said.

But Mylan said it is delaying its annual Investors Day, which was supposed to take place in September. The new date hasn’t been determined.

“We feel it would be in the best interest to come to you with the full picture,” Bresch said.

That includes product launches and the Abbott deal.

“With the noise around inversions and everything else, there’s tremendous speculation and at this point, that’s all it is,” Bresch said. “Everything taken into consideration, the best way to come in front of you guys about how one plus one equals four will be at a later date.”

The $5.3 billion Abbott purchase was announced last month in the heat of national outrage over so-called inversion deals which are occurring frequently within the pharmaceutical industry to lower the amount of taxes paid to the federal government. In Mylan’s case, Abbott is to move its generic business into a new company headquartered in the Netherlands. Mylan would merge into the Abbott spinoff. Mylan’s executive team will continue to be based in Southpointe, but the company’s corporate parent would be based in the Netherlands. Its tax rate would drop from the current 35 percent U.S. rate to 21 percent during the first full year after the deal closes and then falling further into the teens within three to five years. The U.S. Treasury Department is being pressed to take action and Congress is working on legislation. During the earnings call, analysts repeatedly asked Bresch about the inversion issue.

“Here’s my two cents,” Bresch said. “I think there’s a lot of noise and in a sense that the facts have been sheltered. There’s such an uneducated dialogue. I believe it will be very difficult for an executive order by the Treasury that doesn’t jeopardize foreign entities, companies that do a significant amount of business in the United States. I think as much as the Senate may want to be able to say to their constituents that they’re trying to do something, I think the odds of getting anything done ... is unlikely. It’s going to be very difficult to take one piece of our tax code and try to be punitive for companies that are foreign-based or have chosen inversion. We’ve been very clear that it doesn’t mean we stop paying U.S. taxes. A lot of these foreign companies are paying U.S. taxes and creating U.S. jobs. Almost 50 percent of the products sold here in the U.S. come from outside the U.S. If we close our borders and not allow any products in, no one has complained about the trillions of dollars our industry has saved our country over the last decade. Not allowing us to be competitive I don’t believe is in our country’s best interest and I hope that prevails at the end of the day.”